Tata Steel has emerged as the successful bidder for Odisha-based Neelachal Ispat Nigam Ltd (NINL) after agreeing to offer Rs 12,100 crore for the company, marking the first privatisation of a public sector steel plant.
Apart from the 1.1 million tonne (mt) steel plant, which is closed for nearly two years, the acquisition will allow Tata Steel access to a 2,500-acre land bank and an iron ore mine having 100 million tonnes deposit in Odisha.
Following the acquisition — the company’s third after Bhushan Steel Ltd in 2018 and Usha Martin Ltd steel business in 2019 — TSL will have a domestic capacity of 20.7mt. JSW Steel and Jindal Steel & Power Ltd (JSPL) were the other two bidders for NINL, which had a reserve price of Rs 5,616.97 crore.
Soon after the department of disinvestment and public asset management (Dipam) announced the privatisation of the 93.71 stake of NINL, Tata Steel Ltd outlined the group’s growth strategy around NINL.
Pointing out that NINL will become the hub for its long products (bars, rods, wires which go to infrastructure sector) business in the future, the company says it would provide a ‘significant opportunity’ for expansion in the future. The long products business of TSL is being pursued by subsidiary Tata Steel Long Products Ltd, which had put in the bid NINL.
While starting the closed plant ‘expeditiously’, it will ‘immediately’ start work on a 4.5 million tonne expansion, and then taking up the capacity to 10mt by 2030, Tata Steel in a statement said.
The NINL complex will be the fourth growth centre for the company — Tata Steel’s growth in flat products (coil and plates used in automobiles, consumer durables) would be pursued through the Kalinganagar and Meramandalli sites in Odisha apart from the existing capacity in Jamshedpur.
Calling it a strategic acquisition, Tata Steel says the acquisition will be critical for the company to build such a dedicated long products complex which will also be best positioned to leverage synergies with the shared infrastructure of Tata Steel in the area.
TSL plans to fund the acquisition through a combination of internal accruals and bridge loans.
Deal details
NINL is a joint venture of four central PSUs namely MMTC, NMDC, Bhel, Mecon and two Odisha government companies namely OMC and Ipicol. A statement from Dipam said the company has debt and liabilities exceeding Rs 6,600 crore as on 31.3.2021, including overdues of promoters (Rs 4,116 crore), banks (Rs 1,741 crore), other creditors and employees. It has negative networth of Rs. 3,487 crore and accumulated losses of Rs. 4,228 crore as of 31.3.2021.
Initially, TSLPL will pay 10 per cent of the consideration. On the closure date, shares will be transferred to the buyer and the balance amount will be received.
Part-sale proceeds would be infused in the company to the extent of the liabilities which will be set-off and the balance amount in the escrow account will be distributed among selling shareholders proportional to their shareholding.
Post-sale consideration will go towards settling of the liabilities of the company, in the order provided in the waterfall agreement.
